What is Bitcoin: how can we use it for business ?

 So, what exactly is Bitcoin?

It's not a real coin; it's "cryptocurrency," a digital form of payment that's created (or "mined") by a large number of individuals all over the world. It enables peer-to-peer transactions to take place quickly, anywhere in the world, for free or at a very little cost.

What is bitcoin: how can we use for business
What is Bitcoin: how can we use it for business

Satoshi Nakamoto (believed to be a pseudonym), a software developer, devised the method and unveiled it in 2009, following decades of research into cryptography. His exact identity is still unknown.

Bitcoins are exchanged online, making them a commodity in and of themselves, as they are not backed by a real commodity (such as gold or silver).

Bitcoin is a free and open-source product that anyone can use. To get started, all you need is an email address, Internet access, and money.

What is the source of it?

Bitcoin is mined via a distributed computer network of users running specialized software that solves mathematical proofs and looks for a specific data sequence ("block") that produces a specific pattern when the BTC algorithm is applied to it. A bitcoin is the result of a match. It's difficult, time-consuming, and energy-intensive.

There will only ever be 21 million bitcoins mined (about 11 million are currently in circulation). To keep mining operations and supply in control, the network computers tackle increasingly harder arithmetic problems. This network also uses cryptography to validate all transactions.

What is Bitcoin's mechanism?

On a network, Internet users move digital assets (bits) to one another. Bitcoin is described as an Internet-wide distributed ledger rather than an online bank. Bitcoin can be purchased with cash or by selling a product or service in exchange for Bitcoin. Bitcoin wallets are digital wallets that store and utilize bitcoins. Users can trade their Bitcoin to someone else who wishes to join this virtual ledger and sell out. This is something that anyone, wherever in the world, can do.

Bitcoin exchanges abound on the Internet, as do smartphone apps for performing mobile Bitcoin transactions.

What is the price of Bitcoin?

Bitcoin is entirely decentralized, meaning it is not kept or controlled by a financial institution. It cannot be devalued by governments or banks, unlike real money.

Instead, Bitcoin's value stems from its widespread adoption as a form of payment among users, as well as the fact that its quantity is limited. Bitcoin's worldwide currency values fluctuate based on supply and demand as well as market speculation; as more people establish wallets, store and spend bitcoins, and more companies accept it, the value of Bitcoin will climb. Banks are now attempting to value Bitcoin, and some financial websites anticipate that in 2014, the price of a bitcoin will be several thousand dollars.

What are the advantages?

Consumers and retailers that choose to use this payment method can benefit from it.

1. Quick transactions - Bitcoin is rapidly sent over the Internet.

2. There are no or low fees — Bitcoin, unlike credit cards, can be used for free or with extremely little cost. There are no authorizations (or payments) necessary because there is no centralized institution acting as a middleman. This boosts sales profit margins.

3. Reduces the danger of fraud - Only the Bitcoin owner can transmit payment to the designated receiver, and only the intended recipient can receive it. The network is aware of the transfer, and transactions are confirmed; they cannot be questioned or reversed. This is significant for online merchants who are frequently subjected to credit card processors' judgments of whether or not a transaction is fraudulent, or for firms who pay a large chargeback fee.

4. Data is safe — As recent breaches on national retailers' payment processing systems have shown, the Internet is not always a safe place for personal information. Users do not give up personal information when they use Bitcoin.

a. They have two keys: a public key for the bitcoin address and a private key for personal information.

b. Transactions are digitally "signed" by combining the public and private keys, applying a mathematical function, and generating a certificate showing the user started the transaction. Each transaction's digital signature is unique and cannot be reused.

c. Your confidential information (name, phone number, physical address) is never seen by the merchant/recipient, thus it's partly anonymous but traceable (to the bitcoin address on the public key).

5. Convenient payment method — Merchants can use Bitcoin solely as a payment system, and they don't need to hold any Bitcoin currency because it can be changed to dollars. Consumers and merchants can exchange Bitcoin and other currencies in and out at any time.

6. Foreign payments - Because Bitcoin is accepted all around the world, e-commerce retailers and service providers may take international payments with ease, opening up new markets for them.

7. It is simple to track — every transaction in the Bitcoin blockchain is tracked and permanently logged by the network (the database). It is easier for law enforcement agents to track these transactions in the event of a probable crime.

8. Micropayments are possible - Because Bitcoins may be divided down to the hundredth of a percent, making small payments of a dollar or less a free or nearly free transaction. Convenience stores, coffee shops, and subscription-based services might all benefit from this (videos, publications).

Are you still perplexed? Here are a few transaction examples:

In the retail environment, bitcoin

The payer scans a QR code containing all the transaction details needed to send bitcoin to the store using a smartphone app at checkout. The transaction is completed by tapping the "Confirm" button. If a user doesn't have any Bitcoin, the network transforms the funds in his account to Bitcoin.

There were no or extremely low processing fees (instead of 2 to 3 percent), no hackers could gain personal consumer information, and there was no chance of fraud. It's sleek.

Bitcoins in the hospitality industry

For customers who prefer to pay for a reservation online with Bitcoin using their mobile wallets, hotels can accept Bitcoin for accommodation and meal payments on the premises. A third-party Bitcoin merchant processor can help with transactions that are cleared through the Bitcoin network. For users with BTC smartphone apps, these processing clients are deployed on tablets at the front desk or in restaurants. (These payment processors are also available for desktop computers, retail point-of-sale systems, and foodservice point-of-sale systems.) There is no need to exchange credit cards or cash.

The processor may turn bitcoins into dollars and make a daily direct deposit into the establishment's bank account, making these cashless transactions quick. Two Las Vegas hotel-casinos stated in January 2014 that they will accept Bitcoin payments at the front desk, in their restaurants, and in their gift shop.

What's the catch? It sounds fantastic, so what's the catch?

Owners of businesses should think about concerns including involvement, security, and cost.

• Currently, only a small percentage of ordinary consumers and merchants use or comprehend Bitcoin. However, global popularity is growing, and tools and technologies are being created to make participation more convenient.

• Because it's the Internet, hackers pose a hazard to online transactions. In September 2013, a Bitcoin exchange was hacked, and $250,000 in bitcoins were stolen from members' online vaults, according to The Economist. Bitcoins, like any other currency, can be stolen, so network, server, and database security is critical.

• Users must keep their bitcoin wallets, which include their private keys, in a safe place. It's critical to have secure backups or printouts.

• Because Bitcoin is neither regulated nor guaranteed by the US government, your account will be uninsured if the exchange goes out of business or is hacked.

• Bitcoins aren't exactly cheap. On the web exchanges, you may see current rates and selling prices.

Although virtual money has not yet gained widespread acceptance, it is increasing market awareness. A company might opt to experiment with Bitcoin to save money on credit card and bank fees, as a consumer convenience, or to test if it helps or hurts sales and profitability.

Are you considering adopting Bitcoin as a payment method? Do you have any experience with it? Let us know what you're thinking and what you've done.

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